Property funds build up ‘war chests’ for volatility
SOME of the biggest UK property funds have built cash ‘war chests’ of more than 20 per cent in case they are hit by a wave of redemptions in the coming weeks as a result of extreme stock market volatility.
Research by investment platform AJ Bell for The Mail on Sunday shows that UK property funds run by asset managers Kames, Janus Henderson, Legal & General and BMO Global Asset Management are all currently cash heavy.
BMO UK Property and L&G UK Property have 30 per cent of their assets in cash while the equivalent figure for Janus Henderson UK Property is 27 per cent. Most property funds invest in commercial buildings such as offices, industrial units and shopping centres – and can provide investors with a healthy income from the rent paid by tenants. But physical property cannot be sold quickly if there is a sudden surge in investors wanting to withdraw their money.
In the aftermath of the Brexit vote in 2016, some investors had to wait months before their requests for the return of their money were met. The big cash piles currently held by some UK property funds should prevent a repeat although funds managed by M&G and Threadneedle have cash holdings of less than 10 per cent. Laura Suter, analyst at AJ Bell, says: ‘Investors might be nervous about a UK property fund having less than 10 per cent of its assets in cash although cash positions do change quickly as properties are sold or bought.’